May 9, 2008
What exactly is an override and how does it work?
Money (allegedly earned) off the backs of those you have recruited to work for a carrier.
I like the definition above but here is another from Wikipedia:
In traditional sales environments, an override is a commission paid to managers on sales made by their subordinates, usually calculated as a percentage of the gross sales commissions earned by the salesperson.
I have a contract with ABC Life Insurance for 100% (100% of the premium paid is my commission for year 1)
I offer you the ability to sell ABC Life Insurance for 80% commission. I get the other 20% to equal 100%.
Usually, there is a production requirement to do this or get the higher commissions. The carrier will say you have to sell X amount of insurance to maintain the level of contract.
Some carriers will not let you contract direct, you have to go through another person/agency.
Does all this mean that technically if I am not a GA or a manager at any agency, it basically has no bearing on my earnings whatsoever?
Let's take this hypothetical situtation (totally made up and not based in any reality):
Total Commission paid by insurance company: $800.00
So, does the $300 in overrides affect the agent commission? How many people need to have their hands in the agent's pocket?
For those of us who think MLM is bad, what about this situtation? What is the value added of ALL these people?
You might make more, the same amount, or less.
Many times, the GA gets a better rate than you can get because of overall production. Because of this, they get their override without impacting your commissions. In fact, if your production is at a certain level, you may get a bit more than the carrier will pay direct. Or maybe less, hard to say.
GA's work great for those random deals you want to help a client with, but don't want to bother with hundreds of appointments. On the P&C side, this is how I manage a lot of strange things, such as dump trucks, which comes up once or twice a year. I wouldn't do it by itself, but I don't want another agent come in and try to drive a wedge into my account either.
In this case, an override is fine, even if it cuts a bit into the commission I could make if I could get appointed directly, though in the case of things like dump trucks, that isn't likely to happen.
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